What separates an excellent CEO from the rest of the pack?
Executive SummaryThe best CEOs make sure the company’s mission and values amount to more than slogans for office posters. But being the face of the company is only one of six important parts of a CEO’s job, according to a recent analysis by McKinsey & Company. This article introduces all six, also outlining some of the 18 unique responsibilities involved with carrying them out.
In a new study on “The mindsets and practices of excellent CEOs,” McKinsey & Company looked at the six main elements of the CEO’s job—setting the strategy, aligning the organization, leading the top team, working with the board, being the face of the company to external stakeholders, and managing their personal time and energy. The report then broke those down into 18 specific responsibilities that fall exclusively to the CEO.
An excellent CEO doesn’t need to excel at all 18 unique responsibilities, McKinsey said. The best CEOs are excellent in a few areas, able in all others and challenged in none.
- Setting the Corporate Strategy
Excellent CEOs reframe the company’s vision of what it means to win, make multiple bold strategic moves early and methodically, and reallocate resources frequently to focus on priorities.
Making one or two bold strategic moves—such as resource reallocation, M&As or divestitures, capital expenditure, and improvements in productivity and differentiation—more than doubles the likelihood that a company will rise from the middle of the pack to the top, and making three or more bold moves makes such a rise six times more likely. CEOs who make these moves early in their tenure outperform those who move later, and those who do so multiple times avoid a decline in performance.
To ensure resources are allocated where they will deliver the most value rather than spread across businesses and operations, excellent CEOs institute an ongoing (not annual) optimization process that takes a granular view, makes comparisons using quantitative metrics, and prompts when it’s time to stop funding and when to continue.
- Aligning the Organization
The best CEOs think systematically about their people—the roles they play, what they can achieve and how the company should operate to increase people’s impact.
Excellent CEOs identify which roles create the most value for the company and ensure those roles are occupied by the right people. They don’t let lesser or even adequate performers linger in key positions. They also work to develop a robust talent pipeline—which includes making sure the board has viable, well-prepared internal candidates to consider for future CEO succession.
The best CEOs don’t rely only on employee engagement surveys. A proper organizational health assessment considers everything from alignment on direction and quality of execution to the ability to learn and adapt. When CEOs insist on measuring and managing all cultural elements that drive performance, they more than double the odds of their strategies being executed—and over the long term, they deliver triple the total return to shareholders. CEOs should take a thoughtful approach to culture management by role modeling, making sure incentives are aligned to preferred behaviors and outcomes, and investing in employee skill building.
Excellent CEOs understand that being an “agile” company doesn’t require sacrificing stability for speed. They know they can increase agility by determining which features of their organizational design will be stable and by creating dynamic elements that adapt quickly to new challenges and opportunities.
- Leading the Top Team
The best CEOs know that individual and institutional biases and clunky group dynamics can diminish the effectiveness of the top team and its processes. They take care to ensure their management team performs strongly as a unit. This sometimes means adjusting the team’s composition (size, diversity and capability), which can involve hard calls on removing likeable low-performers and disagreeable high-performers. They also commit to making sure the management team stays productive by regularly assessing its operating rhythm, meeting protocols, interaction quality and dynamics.
Management processes are typically delegated among C-suite executives: the CFO looks after budgeting and sometimes strategy; the chief human resources officer looks after talent management and workforce planning; the CIO looks after technology investment. Excellent CEOs ensure coherence across processes by requiring executives to coordinate their decision-making and resource assignments to reinforce company priorities and propel execution of the strategy.
- Working With the Board
The best CEOs work with the board of directors to promote a forward-looking agenda, proactively foster relationships, help develop board capabilities and inform its composition.
Excellent CEOs call for the board to go beyond traditional fiduciary responsibilities (legal, regulatory, audit, compliance, risk and performance reporting) and provide input on a broad range of topics, such as strategy, M&A, technology, culture, talent, resilience and external communications.
The best CEOs even provide input on the board’s composition, making suggestions about which types of expertise or experience would enable the board to better assess and support the business. They ensure new members complete a thorough onboarding program and create opportunities for the board to learn about topics like changing technology, emerging risks and new competitors.
- Being the Face of the Company
Excellent CEOs commit to making a positive big-picture impact, proactively shaping the views of stakeholders and working to build corporate resilience ahead of a crisis.
The best CEOs make sure the company’s mission and values amount to more than slogans for office posters and actually influence decision-making and day-to-day behaviors. They reinforce a corporate purpose that involves not just making money but also benefiting society. And they remember that customers want to purchase from companies that support issues they care about, while workers want to know their skills are being used to benefit a cause.
Excellent CEOs prioritize interactions with important external stakeholders (customers, investors, regulators, politicians, etc.) to motivate action, such as visiting frontline operations to better understand the customer experience the business provides. They know what they want these interactions to accomplish, communicate audience-tailored messages and seek win-win solutions whenever possible.
These CEOs know the importance of building resilience ahead of a crisis. They ensure their companies have an effective risk operating model, governance structure and risk culture. They recognize that most potential crises follow predictable patterns and prepare a crisis-response playbook that sets out leadership roles, resilience tests, action plans and communication approaches.
- Managing Personal Time and Energy
The sheer breadth of the role can leave many CEOs beset by loneliness, frustration, disappointment and exhaustion. Excellent CEOs take command of their own well-being by delegating tasks that can be dealt with by others, choosing to lead with authenticity and guarding against hubris.
A first step is establishing an office (with one or two highly skilled executive assistants and a chief of staff) that makes the CEO’s priorities explicit and helps manage their time. For example, the office should handle meeting agendas, attendees, preparations, logistics, expected outcomes and follow-ups, giving the CEO time to deal with unexpected developments.
Excellent CEOs stay true to who they are as human beings while they fulfill their leadership roles. They think about the legacy they want to leave behind and how they want others to view them as a leader.
The best CEOs form a small group of trusted colleagues to provide discreet, unfiltered and even unasked for advice. They also make an effort to get out of the boardroom and spend time with rank-and-file employees to gain a greater perspective.